A Fresh Upturn in Global Energy Prices as Trump is Said to Turn Down Iran’s Latest Deal Offer – Currency Thoughts
A Fresh Upturn in Global Energy Prices as Trump is Said to Turn Down Iran’s Latest Deal Offer
April 28, 2026
The price West Texas Intermediate oil, now at $100.17 per barrel, is almost 4% above Monday’s closing level. Iran’s proposal, which addressed reopening the Strait of Hormuz but defers discussion of its nuclear development, never realistically had much chance of gaining Trump’s favor. The U.S. position has conditioned any reopening of the Strait on steps that would make Iran’s ability to develop nuclear weapons impossible. The deepening impasse between the U.S. and Iran points to a likely prolonged shutdown of the Strait of Hormuz and potentially much more expensive global energy costs. Trump’s declining approval ratings are a complicating factor that may drive the president to pursue highly risky solutions.
Investors don’t like geopolitically-driven uncertainty, and central bankers tend to become more cautious in such circumstances.
U.S. equity futures, which are also reacting to rising misgivings about the future roll-out of AI, suggest possibly steep initial declines after the opening bell. Share prices closed down 1.0% today in Japan and Hong Kong and 0.5% lower in India, Australia and Indonesia. The German DAX and Paris CAC are also about a half percent weaker. Ten-year sovereign debt yields have increased eight basis points in Italy, six bps in Spain, Australia and France, and five bps in the United States, U.K. and Germany.
Alternatively, the dollar has strengthened this morning, rising above Monday closing levels by 0.3-0.7% against other major monies, and precious metal prices like gold and silver are around 2% softer.
By coincidence, policymakers at many of the major central banks are reviewing monetary policies this week. The Bank of Japan led off this parade of decisions, announcing today that its central bank rate target would remain at 0.75%. However, a third of the 9-person central bank Board dissented with votes to hoist the rate to 1.0%. The split decision was made after five hours of deliberations over two days and coincided with the publication of the Bank’s quarterly Outlook for Economic Activity and Prices in which projected consumer price inflation in fiscal 2026 that ends in March 2027 has been revised higher but for which GDP growth is seen at only half as much as predicted in the prior January update. The three dissenters believe that the goal of sustained 2% inflation has already been met and worry that a much longer prolonged war might lift energy and food costs substantially further. With real interest rates now very accommodative, falling further behind the curve could boost expected inflation and lead to second-order price hikes. The view of the majority on the Board that includes Governor Ueda felt that more time is needed to understand how the Middle East conflict will impact Japanese growth, inflation, and financial markets with a special focus upon the yen. Japanese real GDP in fiscal 2023 and 2024 grew only -0.1% and +0.5%, respectively. That improved to an estimated 1.0% in the fiscal year that just ended, but officials now project GDP rising just 0.5%, then 0.7% and 0.8% in the coming three years. Hence the great caution at they proceed with interest rate normalization. Governor Ueda was very vague in his press conference about the timing of the next and subsequent interest rate hikes. The last rate hiked was done in December, it it has taken two years for the rate to be raised a mere 85 basis points thus far.
The National Bank of Hungary and National Bank of Kyrgyzstan also announced interest rate decisions within the past 24 hours. Officials at the former left their rate unchanged at 6.25%, which was the expected outcome considering that it has been cut by 25 basis points as recently as February and that inflation rose to 1.8% in March from 1.4% in February. As at many central banks, the mood of Hungarian monetary authorities has been one of caution in light of the very big jump in oil prices and the uncertain future evolution of the war in the Middle East. In Kyrgyzstan, where the most recent 11.3% reading for CPI inflation is just slightly below the 12.0% central bank interest rate level and well above the medium-term objective range of 5-7%, there was also a very strong wait-and-see urge felt by policymakers. In this instance, the recent interest rate history has been upward. The rate had been 9.0% from May 2024 until July 2025, and the basis for caution concerns not only geopolitical uncertainties but also wanting to see how the 3-percentage point increase in the interest rate by this past February affects inflation and growth.
U.S. house price inflation fell in February and was lower than predicted. The Case-Shiller index on-year pace of 0.9% was down from 1.2% in the prior month and at a 32-year low, and the FHFA’s rise of 1.7% was the smallest on-year comparison in over a decade.
In the euro area, the monthly measure of what consumers expect from inflation over the coming 12 months shot up to 4.0% from 2.5% in the prior monthly survey.
Italian producer price inflation swung to 4.2%, a 13-month high, in March from a 16-month low of -2.7% in February.
Irish wholesale price deflation at -0.2% in March was much less negative than the -5.5% reading in February.
Japan’s jobless rate in March returned to January’s 2.7% from 2.6% in February as well as the last five months of 2025.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank of Japan, National Bank of Hungary, National Bank of Kyrgyzstan
ShareThisYou can leave a response, or trackback from your own site.
